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									                     Operational review


                     Operational profile
                     Barloworld Automotive provides a range of integrated motor vehicle
                     usage solutions through the successful operation of complementary
                     business units including car rental, fleet services and motor retail.
2008 Annual Report
Barloworld Limited

    Martin Laubscher (48)
    Chief executive officer:
    BAcc, BCompt (Hons) CTA, MCom
    (Business Management)
    21 years’ service

Areas of operation
Motor retail      and distribution   Car rental        Fleet services
Southern Africa   Southern Africa    Southern Africa   Southern Africa
Australia                            Scandinavia
                                                                         2008 Annual Report
                                                                         Barloworld Limited

                                  Operational review                                  (continued)

                                  Barloworld Automotive provides a range of integrated motor vehicle usage
                                  solutions through the successful operation of complementary business units.

                                  Motor retail operates leading motor vehicle franchise dealerships in South Africa
                                  representing passenger, light, medium and heavy commercial brands. Also
                                  included are coachwork repair centres, motor vehicle finance, insurance and
                                  related products and services. In Botswana and Australia passenger and light
                                  commercial brands are represented and motor vehicle finance, insurance
                                  and related products and services are provided. We are the sole importer and
                                  distributor of Subaru vehicles in southern Africa.

                                  Car rental operates Avis short-term car rental throughout southern Africa.

                                  Fleet services provides long-term rental and value-added services to operators
                                  of passenger and commercial vehicles in South Africa, Botswana, Lesotho
                                  Mozambique, Namibia and Swaziland under the Avis brand.

                                  Leadership team
                                  Martin Laubscher (48)                        Keith Rankin (38)                             Ian Walters* (59)
                                  Chief executive officer                      Chief executive: Car Rental                   Chief information officer
                                  BAcc, BCompt (Hons), CTA,                    BCom (Hons)                                   BCom, MBA
                                  MCom (Business Management)                   10                                            27
                                                                               Andy Richardson (47)                          Christopher Whitaker (51)
                                  Allan Carter (55)                            Chief financial officer                       Executive: Human resources,
                                  Chief executive: Motor Retail Australia      CA(SA)                                        organisational performance, strategy
                                  28                                           3                                             BCom, LLB
                                  Dag André Johansen (43)                      Laurence Savage (44)
                                  Chief executive: Car Rental Scandinavia      Chief executive: Avis Fleet Services          * Resigned 30 September 2008
                                  BA (Norwegian School of Management)          Reg Eng T, MBA
2008 Annual Report

                                  Scandinavia                                  9
                                                                               Ciko Thomas (39)
                                  Litha Nkombisa (41)                          Executive: Marketing
                                  Chief executive: Motor Retail                BSc, MBA
                                  Southern Africa                              1
                                  BCom, MDP
Barloworld Limited

                                  Note: The figure after each name (in brackets) is their age at date of publication of this report.
                                  Second figure is the number of years service that they have with Barloworld or businesses we have acquired.

Operating performance
                                                     Revenue                       Operating profit               Net operating assets
                                                Year ended 30 Sept                Year ended 30 Sept                    30 Sept
R million                                          2008          2007                2008          2007               2008         2007

Car rental Southern Africa                         1 586               1 209           250              325           2 849            2 820

– Southern Africa                                 11 622               9 948           143              184           1 850            1 363
– Australia                                        2 849               2 448            62               48             983              743

Trading                                           14 471              12 396           205              232           2 833            2 106

Leasing Southern Africa*                             948                701              85              76             366              346

                                                  17 005              14 306           540              633           6 048            5 272

Share of associate income                                                                 6              17

* Net operating assets after deducting interest-bearing borrowings.

Overview                                                                   objectives. By working closely together our South African
Aligned with the group’s focus areas, the division continued to            business units optimise the opportunities for internal value
create stakeholder value through five strategic themes.                    creation through sourcing, service, repair and maintenance as
                                                                           well as maximising the commercial benefits arising from the
Providing customers with a range of integrated motor vehicle               significant number of quality used vehicles that are a
usage solutions to fulfil their specific requirements remains the          consequence of the automotive division’s activities. Synergies for
cornerstone of the division’s offering. Such solutions include the         the Australian and Scandinavian operations are achieved through
products and services of our individual business units, namely             skills and business practice transfer between the car rental and
motor retail, car rental and fleet services, as well as the unique         motor retail operations respectively.
combination of these products and services for customers who
require aspects from our various business units in a seamless              Quality of earnings and growth are addressed under the theme
combination, effectively and efficiently provided by a single              of profitable growth. Significantly, a decision was taken to
supplier.                                                                  dispose of our Scandinavian car rental operations which is
                                                                           expected to substantially improve the division’s quality of
                                                                           earnings. Also relevant under this theme is the decision to sell
An ongoing commitment and focus on employees through the
                                                                           50% of Subaru Southern Africa to Toyota Tsusho Corporation, in
implementation of employee value creation initiatives continues
                                                                           order to secure growth for the brand with Principal support.
to enhance value creation across all business units in the division.
                                                                           Various other opportunities to grow the division’s offering within
Specific focus areas cover talent attraction and retention, and
                                                                           southern Africa are currently under consideration.
include an extensive commitment to training, development and
attractive employment conditions.
                                                                           The above strategic themes are cascaded into all business units
                                                                           and their collective efforts in this regard aggregate to the overall
Complementing the group’s commitment to empowerment and                    success of the division.
transformation, the division aggressively pursued various
initiatives during the year. In South Africa these were in the             Comprehensive structures exist throughout the division and its
context of the DTI’s Broad Based Black Economic Empowerment                business units in terms of which business risks are regularly
scorecard and underscore the division’s commitment to ensuring             reviewed and appropriate measures adopted to address or
its operations reflect the societies in which they operate. In line        mitigate such risks. These risks are comprehensively covered and
with the group objectives, our South African car rental, fleet             addressed in the division’s strategic initiatives.
                                                                                                                                                  2008 Annual Report

service and motor retail business units achieved a Level 5 or
better rating and are well positioned to achieve Level 4 next year.        All aspects of broad-based black economic empowerment
                                                                           continue to receive attention and, as an integral part of the
Financial returns remained the core focus during the year.                 ongoing focus on training and development in the division,
As usual, optimising business unit performance included                    Motor Retail South Africa opened a technical training centre and
                                                                                                                                                  Barloworld Limited

maximising both inter- and intra-business unit synergies, as well          Avis Rent a Car South Africa established a comprehensive
as the implementation of tight performance targets and                     management development programme.

                     Operational review                            (continued)


                     Tough trading conditions led to declining profitability for the        negative impact on sales. Tough decisions and tight controls
                     overall division. Revenue and operating profit reached                 ensured that the business has weathered these conditions and
                     R17.0 billion and R540 million respectively. Operating profit          managed to improve its market share. A total of 57 531 new and
                     margin was 3.2%.                                                       used retail units were sold in 2008.

                     The South African motor retail operations increased their market       During our financial year the NAAMSA southern Africa new
                     share, similarly Avis Rent a Car improved its southern African         vehicle market was 529 874 units of which 83.3% were dealer
                     market share in terms of rental days, and our fleet services           sales. Botswana had a significantly improved performance,
                     operations increased their total fleet under management.               despite the continued influx of cheap ‘grey imports‘.

                     In our continuing operations we achieved new and used vehicle          In accordance with our dealership strategy of “Fewer, Bigger,
                     retail sales of 85 934 units, against the previous year’s figure of    Better” we continued to make investments in well located,
                     87 711 units. Corporate operations grew car rental days in             world-class facilities. Major new facilities were completed for
                     southern Africa to a total of 5.3 million compared with the            John Williams Motors (Mercedes-Benz) Bloemfontein and
                     previous year’s 4.8 million. At year end a total of 122 419 vehicles   Toyota/Lexus Centurion. Other significant new and renovated
                     were under finance and maintenance contracts compared to               facilities include Audi Centre Cape Town, Audi Centre Bruma,
                     101 910 units last year.                                               Premium Brands showroom of Barloworld City Bruma (General
                                                                                            Motors), Automark showrooms of Toyota Pretoria East and
                                                                                            Toyota Tygervalley, and the pre-owned showroom of Club
                     The motor retail businesses in southern Africa have performed
                                                                                            Motors Randburg (BMW). Barloworld Subaru Culemborg was
                     relatively well in difficult market conditions that saw a year-on-
                                                                                            relocated. Building operations were commenced for Barloworld
                     year decrease in the NAAMSA new vehicle market of some 16%
                                                                                            City Johannesburg (General Motors) and Barloworld City Truck
                     during our financial year. A continued focus on used vehicles and
                                                                                            Centre (General Motors) in City Deep Gauteng, Toyota
                     after-market opportunities supported the result.
                                                                                            Middelburg, Barons Commercial Western Cape (Volkswagen) in
                                                                                            Blackheath, John Williams Commercial (Mercedes-Benz)
                     Our Avis car rental operation in southern Africa increased
                                                                                            Bloemfontein, and for John Williams Motors (Mercedes-Benz)
                     revenue and rental days although higher interest rates, lower
                                                                                            Ficksburg which is relocating to Ladybrand.
                     utilisation and a reduced used vehicle profit contribution
                     negatively affected the result.
                                                                                            In partnership with the Maponya Group, Barloworld was
                                                                                            awarded the Toyota franchise for the greater Soweto area.
                     Avis Fleet Services did well in securing new business
                                                                                            Trading is expected to commence in the last quarter of 2009.
                     opportunities and in growing its fleets, assisted by a higher
                     interest rate environment. A subdued used car segment                  Focus areas in the year ahead include improving asset turn,
                     continued to impact profitability.                                     reducing working capital, controlling interest costs, containing
                                                                                            expenses and exceeding customer expectations. Transformation
                     The Subaru importation and distribution business performance           and empowerment will continue to be addressed and employee
                     was negatively affected by a weaker rand.                              value creation initiatives, particularly skills development and
                                                                                            retention, will be emphasised.
                     Motor retail
                     Motor Retail Southern Africa                                           A total of eight dealerships fall into our NMI-DSM and Garden
                     Motor Retail Southern Africa operates 41 leading motor vehicle         City Motors joint venture which principally covers the Mercedes-
                     franchise dealerships in South Africa and Botswana. The South          Benz, Chrysler and Mitsubishi brands, and also includes the
                     African operations represent passenger, light, medium and heavy        Subaru brand. During the year we increased our effective interest
                     commercial brands and include eight coachwork repair centres,          to 51.2% in these operations which are now consolidated in this
                     motor vehicle finance, insurance and related products and              year’s results.
                     services. In Botswana passenger and light commercial brands
2008 Annual Report

                     are represented and motor vehicle finance, insurance and               Australia
                     related products and services are provided.                            Motor Retail Australia operates in Melbourne and Sydney
                                                                                            retailing new and used vehicles in the passenger and light
                     New vehicle sales declined during the year as a consequence of         commercial segments, supplying parts and servicing vehicles, as
                     rising interest rates and increasing consumer price inflation          well as providing motor vehicle finance, insurance and related
Barloworld Limited

                     which placed consumer spending under pressure. In addition,            products and services. Brands represented are Holden, Mercedes-
                     stricter lending criteria due to the National Credit Act also had a    Benz, Skoda, Suzuki and Volkswagen.

In accordance with our
dealership strategy of
“Fewer, Bigger, Better”
we continued to make
investments in well located,
world-class facilities.
The Australian new vehicle market slowed in the latter part of       system and overall efficiency of the operation continued during
the financial year resulting in a marginal increase over the prior   the year. The Subaru brand has maintained its high profile and
year. Despite slowing growth, the Australian operations delivered    loyal customer base. A transaction has been concluded to sell a
a significantly improved performance. The Mercedes-Benz and          50% stake in this business to Toyota Tsusho Corporation,
Volkswagen operations continued to deliver strong contributions      effective from 1 November 2008.
while our Holden operations remained static as smaller, more fuel
efficient vehicles dominated sales. During the year the Australian   Car rental
operations added Volkswagen affiliate Skoda to the franchise         Southern Africa
portfolio.                                                           Avis Rent a Car Southern Africa operates short-term car rental
                                                                     from over 110 customer service centres throughout southern
For the year, our dealership network sold 9 407 new and used         Africa, and is focused on the tourism, corporate, local and
retail vehicles against last year’s figure of 9 544.                 replacement market segments. A peak fleet of some 21 340
                                                                     vehicles is operated. The operations in South Africa, Botswana,
Material events during the year under review include:                Lesotho, Mozambique, Namibia and Swaziland are owned, while
• A significant improvement in the trading performance for           the balance of the operations are sub-licensed. Avis Point-to-
  Barloworld Mercedes-Benz and a continuing strong
                                                                     Point is a chauffeur-driven inner-city transfer service. Avis Van
  contribution from the Volkswagen dealerships in Melbourne
                                                                     Rental operates a sub-licensee network in South Africa. Avis
  and Sydney.
                                                                     Coach Charter was introduced during the year and operates a
• A new Volkswagen passenger showroom at Five Dock,
                                                                     sub-licensee network in South Africa.
  Sydney was completed.
• A strong focus on providing retail finance and insurance
                                                                     Zeda Car Sales disposes of ex-rental vehicles into the trade and
                                                                     to retail customers.
In October 2008, two newly built dealerships in Melbourne
                                                                     Avis Rent a Car Southern Africa has improved revenue through
representing the Mercedes-Benz and Volkswagen franchises
commenced trading. Barloworld is the largest Volkswagen dealer       firmer rates and increased rental days. Rental volumes grew by
and one of the largest Mercedes-Benz dealers in Australia.           9.6% to 5.3 million rental days. Productivity was supported by a
                                                                                                                                         2008 Annual Report

                                                                     7% growth in rental transactions. The average fleet grew by
Importation and distribution                                         14.2%. Market share of rental days in the region was increased.
Subaru Southern Africa, which holds the licence for the              Higher vehicle holding and damage costs, increased interest
importation and distribution of Subaru vehicles and related          payments, reduced utilisation and lower used vehicle profits,
products in southern Africa, delivered 1 679 vehicles to its         impacted on profitability.
                                                                                                                                         Barloworld Limited

dealers during the year. Currency volatility undermined its
contribution. Investment into improving the dealer management        The Point-to-Point business continues to grow.

                     Operational review                             (continued)


                     Consistent with the division, focus areas in the year ahead              The Budget network across all three countries continued to
                     include improving asset turn, reducing working capital,                  grow their revenue per rental day while maintaining rental day
                     optimising vehicle fleets and utilisation, controlling interest costs,   volumes.
                     containing expenses and exceeding customer expectations.
                     Empowerment and transformation will continue to be addressed             Fleet services
                     and employee value creation initiatives, particularly skills             Avis Fleet Services provides long-term rental and value added
                     development and retention, will be emphasised.                           services to operators of passenger and commercial vehicles.
                                                                                              Products and services include the administration of vehicle
                     Scandinavia      (Shown as discontinued)                                 licensing, maintenance and fuel costs, the acceptance of
                     Following a strategic review a decision was taken to dispose of          maintenance and residual value risks, and vehicle sourcing and
                     our Avis Scandinavia operations. Advisors have been engaged              disposal services. Operations are in all major metro centres in
                     and the transaction is targeted to be completed by the end of            South Africa and regional operations in Botswana, Lesotho,
                     2009. Avis Europe plc., which is the licensor of the Avis and            Mozambique, Namibia and Swaziland. In South Africa, a tender
                     Budget brands in Scandinavia, has been advised of the intended           for the outsourcing of fleet under the South African National
                     transaction.                                                             Parks umbrella was secured, and the contract was implemented
                                                                                              in a black economic empowerment joint venture. This contract
                     The business operates Avis and Budget short-term car rental from         also incorporates the value-added services of accident, fuel
                     more than 350 customer service centres in Denmark, Norway                and driver management. Through a tender process the company
                     and Sweden. The peak regional fleet of some 17 195 vehicles              successfully secured the fleet management for the Lesotho
                     includes 7 120 vehicles owned by sub-licensees. The majority of          government under a five year contract term.
                     our vehicles are purchased with guaranteed buy-backs and we
                     only operate used vehicle sales outlets in Denmark.                      Car Mall disposes of ex-fleet vehicles into the trade and to retail
                     Scandinavian operations grew total rental days by 11.4% to
                     nearly 3.6 million rental days off an increase of 12.3% in rental        Avis Fleet Services grew its fleet under finance and maintenance
                     transactions. Several corporate stations have been converted to          contracts to a total of 122 419 vehicles. Profitability was up on
                     licensees to optimise the opportunities in the marketplace.              last year’s level, attributable to interest rate margin growth, but
                     Profitability in the region was disappointing with the Avis              a depressed used vehicle segment limited profit growth. With
                     operations under-performing in all three countries due to lower          interest rates having increased and a tightening of the consumer
                     than expected rental day growth, negative rate per day growth            environment, the demand for the business’s products and
                     and lower fleet utilisation.                                             services grew. In a slowing economy, companies are seeking
2008 Annual Report

                                                                                                               Avis Rent a Car Southern
                                                                                                               Africa has improved revenue
                                                                                                               through firmer rates and
Barloworld Limited

                                                                                                               increased rental days.

improvements in fleet efficiency and cost control is starting to       Employee value creation recognises the important role of every
regain focus. Consistent with a subdued used car segment for           employee and institutionalises initiatives and structures aimed at
the business unit, the used car contribution was below the 2007        developing, harnessing and directing collective employee
level. The focus in this entity is on the continued growth of value    wisdom towards our value creation objectives. It also ensures
drivers and specific attention to offering customers total fleet       that employees benefit from the value created. The Avis Brand
solutions, while progressing transformation and employee value         Ambassador programme continues to empower employees and
creation initiatives, particularly skills development and retention.   leaders, emphasising the crucial role of personal behaviour in our
Expense management will feature prominently.                           customers’ perception of the organisation and improving its
                                                                       value creation performance.
Stakeholder value creation
The creation of value for all stakeholders remains central to          Our value creation for the communities in which we operate
our business units’ activities. The emphasis is on sustained           is a combination of indirect benefits from employment
improvement in value created, driven by all employees through an       opportunities, rates and taxes paid, and development as well as
integrated set of programmes and initiatives, continually monitored    direct benefits arising from the corporate social investment
and assessed against implemented standards and measures. The           initiatives of the business units which include contributions of
division performed well in difficult economic circumstances.           skills, resources and finance.

We continue to create value for our principals and suppliers           Black economic empowerment in
through investment in infrastructure and business systems,             South Africa
addressing brand exposure, as well as market shares and                In addition to the two strategic black partners which participate
improving business performance. Their confidence in our ability        and contribute to the division under the umbrella of the
continues to be reflected in new opportunities offered to represent    Barloworld Limited broad-based black economic empowerment
their brands and their ongoing commitment to our operations.           transaction, the division benefited directly from the appointment
                                                                       of black executives to its board and the appointment of a black
Customer value remains central to the division’s success. This is      chief executive to its Motor Retail Southern Africa operations. In
evidenced by our continued revenue growth, increasing market           addition, we have a number of significant black economic
shares and independent monitoring. We continue to monitor              empowerment joint ventures.
and focus on customer satisfaction ratings, as we believe it is
through exceeding customer expectations at every interface that        These include our joint venture principally for the Mercedes-Benz
we will achieve a sustainable competitive advantage and create         operations in the greater Durban and Pietermaritzburg
superior value for our customers and other stakeholders.               metropolitan areas in KwaZulu-Natal. Our NMI-DSM and Garden

                                                                                                                                            2008 Annual Report

Avis Fleet Services grew
its fleet under finance and
maintenance contracts to
                                                                                                                                            Barloworld Limited

a total of 122 419 vehicles.

                     Operational review                          (continued)


                     City Motors operation remains one of the leading empowerment        • Chairman’s Award: Mitsubishi Motors
                     initiatives in the industry. Avis Fleet Services has two joint
                     ventures in South Africa, each of which specialises in specific     Subaru Southern Africa
                     markets. The most significant of these is PhakisaWorld Fleet        • NADA Dealer Satisfaction Index Award (Silver)
                     Solutions which manages the fleets within the South African
                     National Department of Transport stable. Avis car rental has a      Motor Retail South Africa
                     49% stake in Sizwe car rental.                                      • Barloworld Fleet Marketing: Toyota SA Status Club – Platinum
                     We continue to be committed to a broad-based empowerment            • BMW Pretoria Paint and Panel: Premier Manager Award for
                     approach and fully support the group’s intent to be a leader in       Approved Repair Centre
                     empowerment and transformation. Our rating objective mirrors        • BMW Cape Town: Premier Manager Award for BMW
                     that of the group.                                                    Premium Selection
                                                                                         • Audi Centre Cape Town: Best Audi Pre-Owned Department
                     Awards and recognition                                                Nationally
                     External recognition for the value we create for our stakeholders   • Ford Pietermaritzburg: Runner-up Dealer of the Year and
                     includes:                                                             winner of Best Service Manager in category – Ford Motor
                     Avis Rent a Car Southern Africa                                     • Ford Pinetown: Best Service Manager in category – Ford
                     • Sunday Times Brands and Branding independent survey: Best           Motor Company
                       Car Rental Brand in South Africa for four consecutive years       • Subaru Bruma: Top Service and Parts Department – Subaru
                                                                                           Southern Africa Managing Director’s Awards
                                                                                         • Barons Volkswagen Group: Dealer Group of The Year
                     Avis Rent a Car Norway
                                                                                         • VW Tokai: Club of Excellence Award
                     • Grand Travel Award for 13 consecutive years
                                                                                         • VW Woodmead: Club of Excellence Award
                                                                                         • VW Bellville: Club of Excellence Award
                     Avis Rent a Car Sweden
                                                                                         • VW N1 City: Club of Excellence Award
                     • Grand Travel Award for 16 consecutive years

                                                                                         Motor Retail Botswana
                     NMI-DSM (Black Economic Empowerment Joint
                                                                                         • Volvo Dealer of The Year
                     • Brand Centre Award: Mercedes-Benz Cars, for the fourth
                                                                                         Avis Fleet Services
                       consecutive year                                                  • Professional Management Review (PMR): Diamond Arrow
                     • Brand Centre Award: Mitsubishi Motors, for the fourth               Award
                       consecutive year                                                  • Toyota SA Status Club : Platinum Award

                                                                                                         Consistent with the division,
                                                                                                         focus areas in the year ahead
                                                                                                         include improving asset turn,
                                                                                                         reducing working capital,
                                                                                                         optimising vehicle fleets and
2008 Annual Report

                                                                                                         utilisation, controlling interest
                                                                                                         costs, containing expenses and
                                                                                                         exceeding customer
Barloworld Limited


It is expected that the prevailing tough industry conditions will
continue into 2009. Whilst maintaining emphasis on the group’s
five strategic focus areas, particular attention will be directed at
improving quality of earnings. In this regard the disposal of the
Scandinavian car rental operations will enhance overall returns. All
our business units will address expense management, controlling
interest costs and exceeding our customers’ expectations. The
South African car rental operations will pursue rate increases,
improvements in fleet utilisation and the optimisation of their
asset base. Our southern African motor retail operations are well
positioned and continue with their “Fewer, Bigger, Better”
strategy coupled with pursuing efficiencies through the
centralisation and coordination of common functions, improving
asset turn and reducing working capital. The Australian motor
retail operations will settle into their new facilities and remain a
well run, focused business unit. Our fleet services business is
expected to benefit from recently awarded contracts and
continue growing the fleets under finance and management.

Continued improvement in value creation for all our stakeholders
remains our core philosophy underscored by a focus on talent
attraction and retention.

Overall, 2009 is expected to be a year of consolidation with the
view to adding value for stakeholders through prudent business
practices and conservative growth by accessing identified unique
opportunities. Optimising the inherent synergies and benefits of
our South African integrated motor vehicle usage solutions
offering is central to our strategy for 2009.

In October 2008, two newly
built dealerships in Melbourne
representing the Mercedes-
Benz and Volkswagen
franchises commenced
                                                                       2008 Annual Report

trading. Barloworld is the
largest Volkswagen dealer and
one of the largest Mercedes-
                                                                       Barloworld Limited

Benz dealers in Australia.


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